When Congress passed the Bank Secrecy Act in 1970, it wanted to curtail money laundering through financial systems. Since the Act's passage, the government has continued to fight the money-laundering battle.
According to the United Nations Office of Drug Control and Crime Prevention, more than $500 billion is laundered annually through U.S. financial systems.
The ATM is of particular concern for regulators, because ownership and monetary placement has historically been hard to track. And while no known reports of money laundering through an ATM exist, the Federal Financial Institutions Examination Council is cracking down, especially on independently owned ATMs.
The FFIEC maintains that an ATM could easily be replenished with illicit currency, which could then be withdrawn by legitimate consumers.
To mitigate money-laundering risks, the Examination Council has asked banks that sponsor independent sales organizations to track ATM-load and reload activity, as well as document the location and ownership of each ISO ATM.
The new regulations have some ISOs upset.
"They want the information up front, but I think they're just casting this huge net out there," said Warren Cato, chief executive of Marrietta, Ga.-based Cabe & Cato Inc. "I put it into the perspective of if you went to Wal-Mart to buy a safe and put it into your house, (and) then the government would come in and ask in advance what you were putting in it."
Cato is not happy about the new requirements, which oblige him to tell his sponsor bank who is loading his ATMs with cash, as well as how often and how much.
"To me, it's a little scary," he said. "I look at it as illegal search and seizure. You can't launder money through an ATM. It's like selling drugs. If you're going to use an ATM to launder money, it's one of the dumbest things you can do."
Jim Tingey, senior vice president of administration for California's Palm Desert National Bank, said some of the regulations are a little extreme.
"It's good for regulators, banks and ISOs to keep this in balance to benefit the cardholders," Tingey said. "But it has to be a good working relationship, where the ISOs provide good reasonable information. ISOs are continuously getting asked for a lot more than they had in the past, and it might be more in the future."
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— Jim Tingey, Palm Desert National Bank |
It's good for regulators, banks and ISOs to keep this in balance to benefit the cardholders," Tingey said. "But it has to be a good working relationship, where the ISOs provide good reasonable information. ISOs are continuously getting asked for a lot more than they had in the past, and it might be more in the future.
The theory behind the new regulations is a good one — to prevent money-laundering at an ATM — Tingey said.
Besides, he adds, sponsor banks are not asking for specific bank-account information — they just want to know the ISO's sponsor-bank contact for each ATM placement.
"This is not the bank's rule," Tingey said. "If the government comes out with a regulation we have to conform with that. It's not coming from banks."
But Cato is concerned the door will open for future regulations.
"It's an unfounded mandate, but I've got to do it to stay in business," he said.
